BANKING SECTOR

dilute-the-role-of-dfs-ex-rbi-guv-calls-for-major-overhaul-of-the-banking-system

Dilute the role of DFS: Ex RBI Guv calls for major overhaul of the banking system

Former RBI governor Raghuram Rajan on Monday, September 21, advised the government to privatize select public sector banks, set up a ‘Bad Bank’ to deal with NPAs, and dilute the role of the Department of Financial Services.

The reforms are necessary to ensure the growth of the banking government without the periodic boom-bust cycles, said a paper titled ‘Indian Banks: A Time to Reform?’ ; co-authored by Rajan and Viral Acharya, Former Reserve Bank Deputy Governor. “Re-privatization of select PSBs can then be undertaken as part of a carefully calibrated strategy, bringing in private investors who have both financial expertise as well as technological expertise; corporate houses must be kept from acquiring significant stakes, given their natural conflicts of interest”; the paper said.

It also argued that state-linked banks can be a first step in altering the ownership structure of some public sector banks (PSBs), where the government brings down its stakes to below 50 percent, creating distance from operations of banks, and improving governance along the way.

On bank license norms, the paper pitched for on-tap licensing of banks to be kept open at all times. The paper also stressed on the need of allowing PSBs to recruit laterally while retaining the talent they have.

23 Sep 2020
psbs-remain-government-captives

PSBs remain government captives

Structural problems of the PSBs, most of them imposed by the government and its system of political governance, has incrementally increased the government shares in 12 PSBs even as it has been seen trying really hard to offload its shares.
For instance, the huge recap infusion of Rs2.6-lakh crore into the PSBs over the past three years - to offset their bad loans - has sharply accelerated government holdings in these banks which could, in turn, limit the size of future capital infusion in certain banks. Of the 12 PSBs, the government holds 92-96 percent in four of them and 83-89 percent in five banks.
Of course, the government would like to offload its shares in PSBs. But the problem is there are very few takers for shares of PSBs despite cheap valuations of 0.4-0.6 times book. The only way investors' appetite in the shares of PSBs can be whetted up is by way of withdrawing the government's socialist hands from the functioning of these banks and driving them towards following the best global banking practices.
Once this transition takes place, investors would be glad to chase PSBs shares and enable the government to recover its cost plus profit. 

16 Sep 2020
dilute-the-role-of-dfs-ex-rbi-guv-calls-for-major-overhaul-of-the-banking-system

Dilute the role of DFS: Ex RBI Guv calls for major overhaul of the banking system

By IndianMandarins 23 Sep 2020

Former RBI governor Raghuram Rajan on Monday, September 21, advised the government to privatize select public sector banks, set up a ‘Bad Bank’ to deal with NPAs, and dilute the role of the Department of Financial Services.

The reforms are necessary to ensure the growth of the banking government without the periodic boom-bust cycles, said a paper titled ‘Indian Banks: A Time to Reform?’ ; co-authored by Rajan and Viral Acharya, Former Reserve Bank Deputy Governor. “Re-privatization of select PSBs can then be undertaken as part of a carefully calibrated strategy, bringing in private investors who have both financial expertise as well as technological expertise; corporate houses must be kept from acquiring significant stakes, given their natural conflicts of interest”; the paper said.

It also argued that state-linked banks can be a first step in altering the ownership structure of some public sector banks (PSBs), where the government brings down its stakes to below 50 percent, creating distance from operations of banks, and improving governance along the way.

On bank license norms, the paper pitched for on-tap licensing of banks to be kept open at all times. The paper also stressed on the need of allowing PSBs to recruit laterally while retaining the talent they have.

psbs-remain-government-captives

PSBs remain government captives

By IndianMandarins 16 Sep 2020

Structural problems of the PSBs, most of them imposed by the government and its system of political governance, has incrementally increased the government shares in 12 PSBs even as it has been seen trying really hard to offload its shares.
For instance, the huge recap infusion of Rs2.6-lakh crore into the PSBs over the past three years - to offset their bad loans - has sharply accelerated government holdings in these banks which could, in turn, limit the size of future capital infusion in certain banks. Of the 12 PSBs, the government holds 92-96 percent in four of them and 83-89 percent in five banks.
Of course, the government would like to offload its shares in PSBs. But the problem is there are very few takers for shares of PSBs despite cheap valuations of 0.4-0.6 times book. The only way investors' appetite in the shares of PSBs can be whetted up is by way of withdrawing the government's socialist hands from the functioning of these banks and driving them towards following the best global banking practices.
Once this transition takes place, investors would be glad to chase PSBs shares and enable the government to recover its cost plus profit. 

s-n-rajeshwari-appointed-as-cmd

S N Rajeshwari appointed as CMD

By IndianMandarins 30 Jul 2020

Ms S N Rajeswari appointed as Chairman-cum-Managing Director in Oriental Insurance Company Limited (OICL) till the date of her superannuation i.e. 31.05.2022. Presently, she is working as GM, New India Assurance Company Limited (NIACL).

government-to-privatise-half-of-the-state-owned-banks

Government to privatise half of the state-owned banks

By IndianMandarins 21 Jul 2020

The government is looking to privatize more than half of its state-owned banks to reduce the number of government-owned lenders to just five as part of an overhaul of the banking industry. The first part of the plan would be to sell majority stakes in Bank of India, Central Bank of India, Indian Overseas Bank, UCO Bank, Bank of Maharashtra and Punjab & Sind Bank leading to effective privatization of these state-owned lenders.

“The idea is to have 4-5 government-owned banks,” said one senior government official. At present, India has 12 state-owned banks. Such a plan would be laid out in a new privatization proposal the government is currently formulating, and this would be put before the cabinet for approval. However, India’s Finance Ministry declined to comment on the matter.

The government is working on a privatization plan to help to raise money by selling assets in non-core companies and sectors when the country is strapped for funds due to a lack of economic growth caused by the coronavirus pandemic. Several government committees and the Reserve Bank of India have recommended that India should have not more than five state-owned banks.

The government has already said that there will be no more mergers (between state-owned banks) so the only option for them is to divest stakes. Last year, the government had merged ten state-owned banks into four, creating a handful of larger banks in the process.

npa-and-banking-crises-ex-rbi-governor-writes-a-book-titled-overdraft

NPA and banking crises: Ex RBI Governor writes a book titled Overdraft

By IndianMandarins 06 Jul 2020

Former RBI governor Urjit Patel has written a book titled ‘Overdraft: Saving the Indian Saver’ which will be releasing later this month. The book focuses on the non-performing assets (NPAs) issue that has afflicted Indian banking in recent years. Patel’s book description says that sovereigns do not need to earn or save before spending money. They can either print or borrow.

 

Patel worked with a ‘9R’ strategy which would protect depositors’ savings, rescue the banks and protect them from “unscrupulous racketeers”. Books or memoirs written by two of his immediate predecessors, Raghuram Rajan and D Subbarao had shed light on various subjects like the RBI’s autonomy, interest rates or its stance on demonetization.

cabinet-okays-bringing-cooperative-banks-under-rbi-supervision

Cabinet okays bringing cooperative banks under RBI supervision

By IndianMandarins 25 Jun 2020

The government will bring an ordinance to put all cooperative banks under the Reserve Bank of India supervision. This is an attempt to streamline them. This decision was taken in the cabinet which was announced by Union information and broadcasting minister Prakash Javadekar.

Now, around 1,482 urban cooperative banks and 58 multi-state cooperative banks will come under the supervisory powers of the RBI. The RBI’s powers as they apply to the scheduled banks will also apply to cooperative banks. This decision will give an assurance to more than 86 million depositors in these banks that their money amounting to Rs 4.84 lakh crore will remain safe.

uco-bank-signs-bancassurance-pact-with-sbi-life-for-insurance-solutions

UCO Bank signs ‘bancassurance’ pact with SBI life for insurance solutions

By IndianMandarins 24 Jun 2020

PSB UCO Bank has tied up with four insurers to offer various insurance products to its customers through its network of branches across the country. The lender teamed up with SBI Life Insurance Company, the Oriental insurance company and Religare insurance Company, Star Health and Allied insurance company for selling their products. With these new partnerships, the lender will now offer a way wider range of insurance products.

UCO Bank signs a ‘bancassurance’ pact with SBI life Insurance to supply insurance solutions to the purchasers of UCO Bank at its 3,086 branches spread across the country. Bancassurance is a partnership between a bank and an insurance firm, where the bank sells the tied insurance company’s insurance products to its clients.

dfs-asks-psbs-to-defer-avoidable-expenditure-in-view-of-covid-19

DFS asks PSBs to defer avoidable expenditure in view of COVID-19

By IndianMandarins 18 Jun 2020

The government has asked Public Sector Banks to defer avoidable expenditure including the purchase of staff cars and refurbishment of guest houses for more productive utilization of financial resources amid coronavirus pandemic.

Department of Financial Services (DFS) has issued a detailed advisory to heads of all PSBs saying it was necessary that banks take appropriate actions to ensure productive use of their financial resources for core business activities. The advisory comes against the backdrop of PNB recently purchasing three Audi cars worth over Rs 1.30 crore for travel of its top executives.

Banks are advised to defer avoidable expenditure beyond the current financial year, including the purchase of staff cars, except where unavoidable. DFS has also directed banks to postpone expenditure on decorative, non-functional items for the interiors in non-customer facing premises like administrative offices and back offices and refurbishment of guest houses.

Further, banks have been asked to effect a significant reduction in expenditure on activities other than those pertaining to core business activities. Besides, DFS has directed banks to avoid travel and adopt digital means of communication as well as make effective use of locally available administrative officers.

DFS, which comes under the finance ministry, has asked banks to place the advisory before their respective boards and issue appropriate instructions internally. In addition, DFS has directed banks for revision of entitlements and perquisites such as entitlements to fixed assets like vehicles and furniture and lease/ rent amounts admissible for hired residential accommodations.

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